Draft Rules 103 to 107 of the Income-tax Rules, 2026 lay down definitions, eligibility criteria, and procedural framework for Advance Pricing Agreements (APAs). Rule 103 defines key terms such as agreement, application, applicant, unilateral, bilateral and multilateral agreements, competent authority, covered transaction, critical assumptions, rollback year (up to four preceding tax years), tax treaty, and APA team. Rule 104 provides that any person who has undertaken or is contemplating an international transaction is eligible to apply. Rule 105 introduces a pre-filing consultation mechanism through Form No. 50 before the Principal Chief Commissioner of Income-tax (International Taxation), where the APA team discusses scope, transfer pricing issues, suitability, and broad terms; such consultation is non-binding and does not constitute a formal application. In bilateral or multilateral cases, the competent authority of India participates. Rule 106 prescribes that a formal APA application must be filed in Form No. 51 with a fee of ₹20 lakhs, either before the first day of the relevant tax year for continuing transactions or before undertaking new transactions, and must be submitted to the designated authority depending on the type of agreement. Rule 107 permits withdrawal of the application before finalisation of terms, though the application fee is non-refundable. Collectively, these provisions create a structured, transparent, and time-bound framework for APA administration.
Extract of Rule No. 103 of Draft Income-tax Rules, 2026
Rule 103
Meaning of expressions used in matters in respect of advance pricing agreement.
For the purposes of this rule and rules 104 to 120, —
(a) “agreement” means an advance pricing agreement entered into between the Board and the applicant, with the approval of the Central Government, as referred to in section 168(1) of the Act;
(b) “application” means an application for advance pricing agreement made under rule 106;
(c) “applicant” means a person who has made an application;
(d) “bilateral agreement” means an agreement between the Board and the applicant, subsequent to, and based on, any agreement referred to in rule 122 between the competent authority of India with the competent authority of the other country regarding the most appropriate transfer pricing method or the arms’ length price;
(e) “competent authority of India” means an officer authorised by the Central Government for the purpose of discharging the functions relating to any agreement entered into under section 159 of the Act;
(f) “covered transaction” means the international transaction or transactions for which agreement has been entered into;
(g) “critical assumptions” means the factors and assumptions which are so critical and significant that if changed, the parties to the agreement shall not continue to be bound by the agreement;
(h) “most appropriate transfer pricing method” means a transfer pricing method, referred to in section 165(1) of the Act, being the most appropriate, having regard to the nature of transaction or class of transaction or class of associated persons or function performed by such persons or such other relevant factors prescribed by the Board under rules 79 and 80;
(i) “multilateral agreement” means an agreement between the Board and the applicant, subsequent to, and based on, any agreement referred to in rule 122 between the competent authority of India with the competent authorities of the other countries regarding the most appropriate transfer pricing method or the arms’ length price;
(j) “rollback year” means any tax year, falling within the period not exceeding four tax years, preceding the first of the tax years referred to in section 168(4) of the Act;
(k) “tax treaty” means an agreement under section 159 of the Act for the avoidance of double taxation;
(l) “team” means advance pricing agreement team consisting of income-tax authorities as constituted by the Board and including such number of experts in economics, statistics, law or any other field as may be nominated by the Principal Chief Commissioner of Income-tax (International Taxation);
(m) “unilateral agreement” means an agreement between the Board and the applicant which is neither a bilateral nor a multilateral agreement.
Rule 104
Persons eligible to apply.
A person shall be eligible to enter into an agreement under these rules, if he-
(i) has undertaken an international transaction; or
(ii) is contemplating to undertake an international transaction.
Rule 105
Pre-filing consultation.
(1) An eligible person may make an application in Form No. 50 to the Principal Chief Commissioner of Income-tax (International Taxation) for a pre-filing consultation.
(2) On receipt of the application, the team shall hold pre-filing consultation with such person.
(3) The competent authority of India or his representative shall be associated in pre-filing consultation involving bilateral or multilateral agreement.
(4) The pre-filing consultation shall, among other things, —
(i) determine the scope of the agreement;
(ii) identify transfer pricing issues;
(iii) determine the suitability of international transaction for the agreement;
(iv) discuss broad terms of the agreement.
(5) The pre-filing consultation shall—
(i) not bind the Board or the person to enter into an agreement or initiate the agreement process; (ii) not be deemed to mean that the person has applied for entering into an agreement.
(6) The provisions of this rule shall not apply in the case of renewal of the agreement.
Rule 106
Application for advance pricing agreement.
(1) An eligible person may furnish an application in Form No. 51 along with requisite fee of ₹ 20 lakhs for entering into an agreement.
(2) The application shall be furnished to Principal Chief Commissioner of Income-tax (International Taxation) in case of unilateral agreement and to the competent authority of India in case of bilateral or multilateral agreement.
(3) The application may be filed by the eligible person at any time—
(i) before the first day of the first tax year for which the application is made, in respect of transactions which are of a continuing nature from dealings that are already occurring; or
(ii) before undertaking the transaction in respect of remaining transactions.
(4) The application shall be accompanied by the proof of payment of fees of ₹ 20 lakhs.
Rule 107
Withdrawal of application for agreement.
(1) The applicant may withdraw the application for agreement at any time before the finalisation of the terms of the agreement by furnishing an intimation to the Principal Chief Commissioner of Income-tax (International Taxation) in case of unilateral agreement and to the competent authority of India in case of bilateral or multilateral agreement.
(2) The fee paid shall not be refunded on withdrawal of application by the applicant.
